1. Study Circle 4 October 2009 SA 230 - Documentation

2. Agenda Welcome & Introduction Form and Content Importance of Documentation Ownership and Custody Elements of an Audit File Referencing financial statements Illustration Assembling the audit file Changes to documentation…after report date Conclusion

3. Welcome & Introduction SA 200 – Basic Principles Governing an Audit International Standards on Auditing (ISA 23) Standards on Auditing (SA) - India What are working papers? Prepared and retained as evidence gathered in connection with an audit to support opinion Aids planning and performance Supervision & Review

4. Form and Content Purpose: Financial Statement Assertions Scope Nature, timing and extent Conclusions Should be ‘contemporaneous’

5. Form and Content (cont’d) Driven by: Form of report Nature of engagement Complexity of client Reliance on controls Record maintenance

6. Form and Content (cont’d) Types: Permanent file(s) Current Audit file(s)

7. Importance Re-performance Standards Audit Evidence gathered Should be completed before issuance of opinion Assistance in reviews: -Peer Reviews -External Reviews -Internal risk & quality reviews

8. Ownership & Custody Property of the Auditor Should be addressed in the engagement letter Archival of files Period of retention of work papers

9. Elements of an audit file Lead schedule Audit work steps – see illustration Coaching notes Critical matters – judgements and estimates Hard copy information and evidence

10. Referencing financial statements Number all pages Reference each line item on balance sheet and profit & loss to the appropriate lead schedule Foot/ cast Agree prior year information Agree note disclosures to face statements Check typos/ spelling mistakes Read through for language and contextual errors Check other information (e.g. statutory records) Include tick-mark legend

11. Illustration Step Engagement Name Period End:31 December 200x Status: Pending or Final Title: Confirm selected bank accounts and special arrangements Audit Objectives: Completeness, Accuracy, Existence/Occurrence, Rights and Obligations Paper File? Details

12. Illustration (cont’d) Tailored Procedures: When performing confirmation procedures, we should maintain control over the process of selecting those to whom a request will be sent, the preparation and sending of confirmation requests, and the responses to those requests. Second requests and, where warranted, third requests should be mailed when responses to confirmation requests have not been received within a reasonable time. a) Select deposit bank accounts for confirmation in order to obtain the desired level of assurance. Bank confirmations should be sent to banking relationships to identify accounts not included in the general ledger.

13. Illustration (cont’d) For confirmations returned: 1.agree account information and account balance to comparative summary; 2.investigate all discrepancies reported or questions raised in review and determine whether any adjustments are necessary; and 3.assess impact of special arrangements or restrictions identified and determine whether disclosure is appropriate. 4.We should perform alternative audit procedures where no response is received to a confirmation request. The alternative audit procedures should be such as to provide audit evidence about the assertions that the confirmation request was intended to provide.

14. Illustration (cont’d) Results of work done: a) 1) Find below the detail of the bank confirmation received: Account numberAccount nameBook BalanceStatement Difference 8700000Operating account 12,567,9802,145,908 422,072 8700001Payroll account10,345 10,400(55) 8700002Loan account(345,098)(345,098)0 8700004Investment4,000,000 4,000,0000 2) Done. 3) No issues. 4) Not applicable – all confirmations were received.

15. Assembling the audit file The auditor should complete the assembly of the final audit file on a timely basis after the date of the auditor’s report. Administrative work that can be performed Deleting or discarding superseded documentation. Sorting, collating and cross-referencing working papers. Signing off on completion checklists relating to the file assembly process. Document: When and by whom they were made, and reviewed; The specific reasons for making them; and Their effect, if any, on the auditor’s conclusions.

16. Changes to documentation …..in rare circumstances, after the date of the Auditor’s Report: When exceptional circumstances arise after the date of the auditor’s report that require the auditor to perform new or additional audit procedures or that lead the auditor to reach new conclusions, the auditor should document: -The circumstances encountered; -The new or additional audit procedures performed, audit evidence obtained, and conclusions reached; and -When and by whom the resulting changes to audit documentation were made, and (where applicable) reviewed.

17. Conclusion “Tell the Story”